Government agrees to cut PSO tax

A majority in Parliament has agreed to reduce the total PSO tax – a green tax that companies and private energy consumers must pay to support the development of sustainable energy sources.

The agreement – which achieved a majority through the support of Socialdemokratiet, Dansk Folkeparti, Radikale, Venstre, Socialistisk Folkeparti, Liberal Alliance and Konservative – is in response to the EU Commission’s criticism that the PSO system goes against EU law and must be changed by the end of the year.

“I am very pleased that the government and such a broad majority has landed a deal in the very tough PSO case,” said Lars Christian Lilleholt, the energy and research minister.

“It united the parties’ wishes to continue with the green transition and cut the PSO tax in a way that is still manageable for households and business. And we are simultaneously straightening our ability to compete and gain growth. Axing the PSO tax is the next smart step in Denmark’s transition to be independent of fossil fuels by 2050.”

According to the government, Danish homes will see their electricity bill reduced by about 10 percent on average, while the business sector will see an estimated 25 percent reduction on average – and have some of the lowest electricity prices in the EU, on a par with Sweden, Norway and Finland.

However, axing the tax will require the government to raise the bottom tax rate by 0.05 percent in 2018 and increasing it up to 0.09 percent by 2022 and beyond.

The key elements in the PSO tax change are:

– the gradual cutting of the PSO tax change from 2017-2022 so support to sustainable energy is in future financed by the budget

– the offshore wind turbine park Krigers Flak, and two coastal wind turbine parks on the west coast will be completed

– the energy companies saving obligations are reduced from 12.2 PJ (petajoules) annually to about 10.1 PJ annually in the period 2017-2021

– a green climate slush fund totalling 375 million kroner (50 million in 2017, 50 in 2018, 100 in 2019 and 175 in 2020) will support the Denmark’s green transition towards its 2030 goals

– the ForskEL program, which supports research, development and demonstration projects that contribute to the utilisation of environmentally friendly electricity, will be moved to the budget law and re-prioritised to EUDP at the energy authority Energistyrelsen